Treasury yields steady ahead of Powell testimony, debt supply

(MarkeyWatch) – U.S. Treasury yields held their ground early Tuesday as traders watch the path of COVID-19 in Europe, a key bond auction and testimony from Federal Reserve Chairman Jerome Powell.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.674% was at 1.209%, versus 1.208% in the previous session. The 2-year note rate TMUBMUSD02Y, 0.141% rose to 0.139%, from 0.137% on Monday, while the 30-year bond yield TMUBMUSD30Y, 1.418% was down to 1.421%, from 1.426%. Bond prices move inversely to yields.

What’s driving Treasurys?

Markets continued to monitor the state of COVID-19 in Europe amid signs that the trajectory of the disease was picking up in Spain, France and the United Kingdom. It remains unclear if policymakers are willing to put in place similar restrictions as those in March at the risk of stalling a fragile economic rebound.

Federal Reserve Chairman Jerome Powell will testify before the House Financial Services Committee on Tuesday at 10:30 a.m. Eastern. According to remarks released before his testimony, he will say the Fed is ready to use all its powers to strengthen the recovery.

SeeFed’s Powell tells Congress it’s up to them to provide aid to some troubled companies

Investors will also handle some U.S. economic data, with the August reading for existing home sales due at 10 a.m. ET.

The Treasury Department will auction off $52 billion of 2-year notes in the afternoon. New sales of government paper can sometimes weigh on trading as broker-dealers make room for the debt supply.

What did market participants’ say?

“A sense of urgency has returned as infection rates soar, forcing investors to reassess the economic trajectory after Q3. The warnings for what lies ahead and government measures to stop the spread have been ramped up. Price action is catching up accordingly, even if it’s too early to say the data have turned,” said Kenneth Broux, an analyst at Société Générale.

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